If you are thinking of opening a franchise, you will need to make a lot of decisions. Naturally, you will need to know what sort of franchise you want to start, but from there you are still faced with a number of choices, including where to obtain franchise funding. In the past, Franchise financing was fairly easy to secure, but in recent years, capital for such ventures has been decreasing, so it is important that you do your research your options before applying for a loan.
One of the most common routes for franchise loans is the Small Business Administration (SBA). The SBA does not offer loans, but rather, it provides loan guarantees, which helps ensure approval. In many cases, the SBA is willing to guarantee as much as 75% of your loan. The idea is that, because a loan comes with SBA backing, lenders will be taking a smaller risk and will be more likely to offer you Franchise Financing.
Getting a loan guarantee from the SBA is only part of the equation, however. Another option you have to help ensure your funding is approved is to lease your business equipment. Many franchises offer a leasing option, and if you take advantage of leasing, you can reduce the amount of money you borrow from other lenders at this initial stage. Even if your franchisor does not offer leasing, you may be able to lease equipment through another source, so it is in your best interest to explore the possibilities.
Although securing Franchise Financing has been a little more difficult in recent years, the resources are out there, and they will probably go to those with the best plans. Therefore, it is extremely important that, as you seek out a loan and explore your options, you come to the lender having done your research.
Of course, you should know what franchise you are interested in purchasing, but you also need a clear idea how you want the financing to work. Securing an SBA guarantee and finding a source for leasing equipment are two of the best ways to make that happen.
Need somewhere to start? BoeFly allows you to shop your financing requests to over 3,600 lenders to see who is willing to fund your business, as well as who will offer the best rates.
For Franchisors looking to offer BoeFly’s online business loan platform to their franchisees, See Here!